What is debt interest?
Debt interest is the money the government pays each year to the people and institutions it has borrowed from. It is one of the largest items of UK public spending. Between April and August 2026, central government interest payable was £50.0 billion.
The UK government pays interest mainly on gilts. Some gilts are index-linked, so their payments rise with RPI inflation. That makes the bill jump when inflation is high. In August 2026 central government interest payable was £8.8 billion, the highest August figure since monthly records began in 1997. Over the first five months of the financial year it reached £50.0 billion. That was £2.0 billion more than the OBR had forecast. Debt interest has grown because the debt is bigger and interest rates are higher than in the 2010s. Every pound spent on interest is a pound not available for schools, hospitals or tax cuts. Rising yields today feed into higher interest costs for years. It now costs more each year than the whole defence budget.
The left often argues that interest costs should be tackled through growth and fairer taxes rather than cuts to services.
The right often points to rising debt interest as proof that borrowing must come down.
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Why does inflation raise UK debt interest?
About a quarter of gilts are index-linked, so their payments rise with RPI inflation.
Who receives UK debt interest?
Gilt holders, such as pension funds, insurers, banks and overseas investors.